Irish Water paid bonuses to their employees even if they had a ’Needs Improvement’ rating on their performance Review. You might ask what is so unusual about paying bonuses in a company, don’t all companies do this and isn’t this the way to stimulate performance in a company and from what we have seen of Irish Water so far their performance definitely merits improvements.
Paying bonuses to employees for their performance is counterproductive and doesn’t do anything to increase the performance of employees, the opposite is true.
Repeated research by highly regarded institutes over the last 30 years has proven without doubt that paying bonuses for performance doesn’t work and is counterproductive. Keep in mind the banking crisis; the collapse of a complete sector which paid itself the highest bonuses. If bonuses worked the banking sector should be thriving!
Any self respecting HR practitioner knows this and would be very careful regarding implementing a bonus culture in a new company. That is the surprising thing about Irish Water, as it is a new company it has all the opportunities to establish a new culture and implement policies which would help it perform, yet Irish Water immediately returned to the failed old bonus culture. It tells me that top management is not focussed on creating a new efficient organisation based on new proven scientific methods but are very focussed on keeping things as they are. This is not very convincing for the executive of a newly formed company assigned with such an important task.
Dan Pink in his book: ‘Drive, the Surprising Truth About What Motivates Us’ reviews the new motivational theories developed over the last 30 years. He concludes that when it comes to motivation there is a gap between what science knows and what business does. Our current business operating system – which is built around external, carrot and stick motivators (performance bonuses) doesn’t work. Science has shown us that the new motivational approach which works has three essential elements 1) Autonomy, the desire to direct our own lives. 2) Mastery – the urge to get better and better at something that matters and 3) Purpose – the yearning to do what we do in the service of something larger than ourselves.
Up to the end of the last century motivation and bonuses were built around external rewards (performance bonuses) and punishments. That worked fine for routine 20th century tasks. But in the twenty first century this old system is proving to be incompatible with how we organise what we do, how we think about what we do, and how we do what we do. When the carrot and stick approach used for more complicated management roles strange things begin to happen.
Traditional ‘if-then’ rewards can give us less than what we want. They can extinguish intrinsic motivation, diminish performance, crush creativity and crowd out good behaviour. They can also give us more of what we don’t want; they encourage unethical behaviour, create addictions and foster short term thinking. And that is exactly what is happening at Irish Water at the moment.
The Carrot and Stick approach isn’t all bad. It can be effective for rule-based routine tasks, because there is little intrinsic motivation to undermine and not much creativity to crush. However, this doesn’t apply when you are setting up a new organisation. Then creativity, ethical behaviour and performance are very much in demand.
Modern motivational theory centres on three important elements for employees of a company: Autonomy, Mastery and Purpose. This is what Irish Water should have been focussing on instead of a quick performance bonus which is counterproductive.
If you want to see a youtube video from Dan Pink about this have a look below.